Lenzing Ag Ord

Gentlemen, welcome to the Lensing analyst call. I'm Moritz, the call operator. I would like to remind you that all participants will be in the listen-only mode and the conference is being recorded. The presentation will be followed by a question-and-answer session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Stefan Zilauf, CEO. Please go ahead, sir.

Thanks a lot, operator. Ladies and gentlemen, a very warm welcome to the presentation of Lansing's results for the first quarter 2024. With me today is Nico Reiner, our CFO. Let's go through our agenda for today. We will start, as you know from former calls, with the executive summary, followed by a market update. Nico Reiner will guide you through the financials afterwards, and I will share an update on our holistic performance program as well as the outlook. We will end, as always, with a Q&A. Let's start with an overview of the key developments. To sum it up, the market recovery is still lacking. But we, as Lansing, see continued and increasing positive impacts from our holistic performance program, both on top line and bottom line. In a nutshell, the market doesn't help, so we have taken our fate into our own hands by executing the performance programs. The generic market relevance for us still show little signs of recovery and especially prices continue to remain under pressure. On a positive note, we see a good start of our performance program in 2024 with further increase in fiber sales volumes and cost savings ahead of plan. The program had a strong start and Walter Bickel joined us a couple of weeks ago to further advance and accelerate it, which will allow Nico Reiner, Christian Skillig, and myself to focus more on the core tasks, particularly on sales growth, operations, and strategic direction. Let's look now at our financial results, which I clearly consider showing positive developments. Revenue increased by 6% versus Q1 2023 to 658 million euros. EBITDA significantly increased by 42 million compared to 30 million in Q1 2023 to 71 million euros. Net results reached minus 32 million euros, which compares to minus 80 million euros in quarter one 2023. On a truly positive note, free cash flow was at plus 87 million euros or more than 200 million higher compared to the first quarter 2023. It was for the third time in a row that a quarter has shown positive free cash flow, leading to a further decrease of our net financial debt. So overall, our financials did clearly beat our initial assumptions for quarter one, despite the lack of market recovery. Looking at the outlook. We continue to have a laser focus on exploiting the full potential of the performance program and further drive both top and bottom line. Q1 2024 delivered better than expected for us. Even though we have a cautious outlook on the generic fiber market development, we see for ourselves a good and healthy order book in the beginning of quarter two of this year. With regard to pricing, we expect ourselves to increase average prices driven by performance program and our specialization strategy. All in all, we are well on track with the performance program and also with our strengthened order book. We expect to further improve our operational results in Q2, in Q3, and Q4 compared to Q1 2024. With Q1 in our books and our positive view on the next quarters, we therefore clearly confirm our expectation for EBITDA for 2024 to be higher than in the previous year, to be precise. Ladies and gentlemen, let's have together a look at our markets. our supply markets of key ingredients and energy, and the markets of our customers on the example of textile apparel. As mentioned, we saw no or very little positive development from a market perspective. Let's start with the development of apparel retail sales in quarter one, 2024. And as you know, the textile apparel market is very important to us. According to our preliminary estimates, global demand for apparel remained slightly negative in the first quarter, minus 1%. While China came out slightly positive, reflecting overall muted local demand, Europe saw a decrease of minus 4%, likely partially based on challenging macro conditions as well as overall soft consumer sentiment. That was compensated on a global level by a positive development in the U.S., which, as you might remember, saw small decline overall in 2023. These are overall textile market developments. We will look at our own figures in a bit, but I can already say that we saw much more positive development for our sustainable fibers. Let's look at the prices. And let's look at viscous, cotton, and dissolving pulp prices. And please be aware, we are looking here at generic market prices in China. not lengthening fiber prices, which are mainly traded at a premium. Viscous prices stepped up in the middle of the quarter due to good demand directly after Chinese New Year holidays, but then started to soften again and ended the quarter only a little higher than in Q4 2023. Looking at the levels in Q1 2023 or even further back, Current levels are lower, and generic viscous prices therefore continue to remain under pressure. International cotton prices rallied in February. We see this development rather pushed by speculation than based on market fundamentals. Since then, prices came down towards previous levels. Dissolving pulp prices increased throughout the first quarter supported by both tight supply and favorable demand from stable downstream operations. Let's look at energy and chemicals. Energy and chemicals costs came mainly down in the first quarter compared to the fourth quarter of 2023. However, If you compare those costs to the previous years, most prices are still elevated. Natural gas prices in Europe were still almost three times as high in quarter one 2024 compared to 2020. And coal prices in China were still higher by 57% and in Indonesia by 78% compared to 2020. Prices for caustic soda remained stable in Europe in the first quarter and decreased slightly in China. Prices in Southeast Asia, however, continued to increase in the first quarter 2024. Compared to 2020, those market prices were still 28% to 63% higher in quarter one 2024. So to sum it up, we saw still no sustainable recovery on the fiber market side, with especially prices remaining under pressure, and input costs like energy and chemicals are still on elevated levels compared to 2020. And with this, I hand over now to Nico Reiner for an update on financials.

Thank you, Stefan, and a warm welcome from my side as well. Let's start with the development of our fiber sales volume. As Stefan mentioned, the markets did not help us on the demand side. However, the measures taken in our holistic program is driving sales volumes. They increased by 24% in Q1 2024 compared to the first quarter of 2023. We saw a clear outperformance of our sustainable fibers. I would like to especially highlight the development of our Lensing EcoVero fiber sales. They increased by more than 50% since Q1 2023. Let's look at our revenues. They increased in the fourth quarter compared to the same period last year by 6% to 658 million euros. The revenue from the fiber division increased by 8.5% to 502 million euros, while pulp revenues decreased by 2.5% to 155 million euros. To remind you, The level of pulp revenues also depends on the share of pulp we use for our own production and the share that we sell externally. Pulp revenues accounted for 24% of our revenue. EBITDA significantly increased by 42 million euros to 71 million euros. This figure includes positive impact from the valuation of biological assets of 7 million euros, which is less than the previous quarters. We show here also the development of our EBITDA, excluding the positive impact from biological asset valuation and the sale of CO2 certificates, where you see steadily improving numbers reaching 64 million in Q1 2024. Let's move to the next slide. Looking at EBIT, it reached positive 1.5 million euros with depreciation and amortization being at slightly below 70 million euros. To remind you, the strongly negative EBIT in Q4 2023 was heavily affected by the impairment of 465 million euros. With the impairment, EBIT would have been at minus 1 million euros. The financial result was at minus 19 million euros in Q1 2024, and income taxes were at 9 million euros. As a result, For net profit after minorities in hybrid bond, we reported still a net loss of 32 million euros in Q1 2024, which compares to minus 80 million euros in Q1 2023. This is an improvement of 49 million euros, but our ambition, of course, is to become positive here as well. Let's move to the next slide. Looking now at cash flow, Lensing further increased its operating cash flow to 121 million euros, which compares to minus 48 million euros in Q1 2023. With regards to CAPEX, Lensing is putting a clear focus on maintenance and license to operate projects as part of its performance program and capex significantly decreased to 33 million euros. This compares to 85 million euros in Q1 2023. As a result, free cash flow increased by 220 million euros compared to Q1 2023 to 87 million euros. Free cash flow has steadily improved and has been positive now for three quarters in a row. This development shows clearly a positive impact from the measures defined in our performance program. Great working capital continued to decrease in the first quarter and was down a solid 115 million euros from the peak levels in Q1 2023. Let's move to the balance sheet. On the left side of the slide, we show the development of net financial debt. Net financial debt significantly decreased by 438 million euros or 23% compared to Q1 2023 and was below 1.5 billion euros at the end of the first quarter. On the right side, you see the development of our liquidity cushion. It increased by 406 million euros or 63% compared to Q1 2023 and reached a solid 1.05 billion euros at the end of the first quarter 2024, which is a result of our clear focus on free cash flow generation. I hand back now to Stefan, who will share an update on Lansing's holistic performance program.